The chief executive of North East software giant Sage Group has hailed strong investments in the business for driving up half-year revenues above the £1bn mark.
The Cobalt Business Park-based business saw statutory revenues rise 16% to top £1.087bn, while annualised recurring revenues increased 12% from £1.878bn to £2.1bn in the six months to March 31, driven by new customers adopting its products. Sage said underlying recurring revenue increased by 12% to £1.039bn, underpinned by strong Sage Business Cloud growth of 29% to £787m. A geographic breakdown of revenues showed the greatest uplift in North America, which jumped 28% from £376m to £483m.
Underlying operating profit increased by 14% to £227m and Ebitda increased by 13% to £275m. But statutory operating profit decreased by 23% to £157m due to the change in recurring and non recurring items, including a £49m one-off gain in the prior period relating to the disposal of Sage Switzerland.
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Looking ahead, Sage now expects organic recurring revenue growth for FY23 to be in the region of 11%, driven by continued strength in Sage Business Cloud.
Steve Hare, chief executive officer, said: “Sage performed strongly in the first half, accelerating revenue growth, increasing profitability and making further progress against our strategic priorities. Our investments in technology and in sales and marketing are continuing to drive results, as small and mid-sized businesses increasingly choose Sage as a valued partner to transform the way they work.
“Our purpose is to knock down barriers so everyone can thrive. We are committed to delivering innovative, AI-powered services that make our customers’ lives easier and their organisations more productive and resilient. Sage’s global platform, centred on our expanding digital network, is enabling us to leverage our scale and collective expertise to maximise the significant opportunities we see across our markets.”
Speaking to The Journal, Mr Hare said that Sage had been embedding generative AI into its products for some time, and that opportunities lie ahead, including the forthcoming launch of a new product in Beta form in North America.
He said: “We do see a big opportunity from the next generation of generative AI to help small and mid-sized businesses become more productive. We have our own AI capability but we also have partnerships with people like Microsoft so that we can work closely with them.”
Mr Hare expects more growth to come as more companies seek to digitalise their operations, which has been backed up in a survey indicating investment intentions of thousands of businesses.
He said: “We’ve recently done a survey of nearly 12,000 small to mid-sized businesses around the world including a high proportion in the UK and what we are seeing is they are feeling confident, they are feeling resilient, with over 80% feeling confident in their futures and over half intending to invest more in technology. So although they are seeing headwinds, with cost challenges, often struggling to find the right people when they’re hiring, what they are striving to do more and more is invest more in their own productivity, which plays into the tools and software we sell.”
The group moved its operations from Gosforth’s Great Park to new headquarters at Cobalt Business Park last year, also unveiling new branding.
Mr Hare said: “We’re very pleased with the move. It’s great to have so many people now in that new environment. We’re continuing to hire in the North East and there’s a really good buzz there.
“We’re just really pleased to be in this position. It’s great that Sage is growing, but it’s also great that, compared to where we were four or five years ago, we can really seriously say that we are one of the leading players from a technology perspective. We’re really well placed to serve our customers.
“We’re starting to see the benefit of all the investment and hard work in recent years to get Sage in a position to be able to support its customers in the way that we are, and grow in the way that we are.”
The interim results also highlight how Sage has launched a new internal talent marketplace “to enhance workforce mobility and agility”, alongside work to develop and retain talent in house and in conjunction with third parties like London Business School.
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